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Wed 15 Oct 2008 02:06 PM

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ADCB exposed to funding pressures - Merrill

US bank says Abu Dhabi Commercial exposed due to amount of wholesale funding.

Abu Dhabi Commercial Bank is likely to be more exposed to funding pressures than other UAE banks, Merrill Lynch said.

The UAE’s third largest lender by assets is “likely to be the most exposed to rising rates and funding pressures” because of it is “highly geared to wholesale funding”, Merrill Lynch said in a report on Tuesday.

Banks in the UAE have been suffering from a liquidity shortage, which has seen interbank lending rates soar.

The liquidity shortage has been caused in part by an exodus of foreign money since the Gulf said in April it would keep its dirham pegged to the dollar, quashing market bets the currency could be revalued to fight inflation.

Merrill Lynch said ADCB has $1.8 billion in the medium term debt due in the second half of this year, amounting to 4.7 percent of assets, “which will pose an additional funding challenge that is not currently faced by peers”.

EFG-Hermes on Wednesday also raised concerns about ADCB’s “constrained balance sheet”, in part due to the amount of wholesale funding on its books.

The Egyptian investment bank said in a note on the UAE banking system that ADCB was “one of the more stretched banks”.

ADCB was down 5 percent, or 16 fils per share, at 11.53am on Abu Dhabi. The stock has lost 47 percent this year.

ADCB was not immediately available for comment when contacted by Arabian Business.